George Osborne to unveil £6bn of spending cuts as era of austerity begins

George Osborne will unveil a £6billion package of spending cuts on Monday that
will lead to the elimination of thousands of civil service jobs, sweeping
efficiency measures across Whitehall and “painful” retrenchment in the wider
public sector.

George Osborne

By James Kirkup, Political Correspondent

10:57PM BST 23 May 2010

In the first major economic statement from the coalition Government, the Chancellor will announce a new era of austerity for state employees and public bodies. Whitehall officials and other bureaucrats will be among the first to feel the effects of the cuts, with the end of perks such as first class air and rail travel to save £10million.

A civil service recruitment freeze will be imposed, with the probable loss of more than 3,000 jobs. Wasteful and inefficient public sector projects will also be targeted, with more than half a billion pounds cut from spending on quangos and a reduction of up to £1billion in the budget for consultants and advertising.

Officials said the announcements for the current financial year were only a taste of much larger cuts to be unveiled later in the year, when departmental budgets for 2011-14 are to be announced following a wider spending review. Whitehall ministries face cuts of up to 25 per cent.

The cuts are based on controversial plans drawn up by the Conservatives in opposition. During the election campaign, the Liberal Democrats opposed any cuts during the current financial year, warning that they could plunge the country back into recession.

However, Nick Clegg, the Deputy Prime Minister, warned that the scale of the public deficit and the growing financial crisis in the eurozone had persuaded him that immediate action was needed.

Mr Clegg admitted that the cuts, to be unveiled by Mr Osborne in a speech at the Treasury, would be “painful and controversial”. He said ministers were prepared for public anger but insisted that the coalition would push ahead, declaring: “The age of plenty is over.”

Ministers will argue that the Chancellor can find most of the £6billion by eliminating public sector waste, but officials said the cuts would mean real pain for some. Ministries such as the Department for Education and the Department for Business will have to make hundreds of millions of pounds of savings.

Mr Osborne will say Whitehall is bearing its fair share of the cuts with measures including:

* A civil service recruitment freeze saving £163million — equating to an estimated 3,260 vacancies not being filled when staff retire or leave.

* A cut of £513 million from government spending on quangos, with some bodies to be abolished outright.

* Renegotiation of major government supply contracts, saving up to £200 million.

* In a populist gesture to make the cuts more palatable, central government funding for speed cameras will be cut, which the Government hopes will lead to a halt in the expansion of the speed camera network.

Mr Osborne will publish the details of the budget cuts alongside his Liberal Democrat deputy, David Laws. The £6billion is only a fraction of the £704billion the Government is projected to spend during 2010/11.

But experts have warned that the savings could be hard to deliver, meeting resistance from public sector unions and some voters.

The Government deficit for 2009 was £159.2 billion, which was equivalent to 11.4 per cent of gross domestic product (GDP). At the end of December 2009 total government debt was £950.4 billion, equivalent to 68.1 per cent of GDP.

Since taking office, David Cameron has attempted to project the image of a more humble and austere government where ministers and officials enjoy fewer trappings of power. He ordered ministers to accept pay cuts and reduced the number of chauffeur-driven government cars.

Mr Osborne will announce that a continuing investigation into wasteful and inefficient spending has identified a number of budget items that are expected to be eliminated.

They include scores of phone lines and call-centres that deal with less than half the number of calls they are staffed and equipped to handle. More than 200 telephone lines operated by the Department of Health receive fewer than 100 calls a month.

HM Revenue and Customs runs a number of “inquiry centres” that receive as few as 11 visits a week.

The Education Department is spending £1million a year on “government office networking” events where officials get to know staff from other departments.

The Department for International Development has been spending £60,000 sending each edition of its in-house magazine to staff overseas via airmail.

Another casualty of the cuts will be Labour’s promise to abolish prescription charges for individuals suffering from long-term conditions.

Andrew Lansley, the Health Secretary, will publish a report this week by Prof Ian Gilmore which concludes that it is impractical to define which individuals, drugs and conditions should be exempt from charges.

He will suggest that the decision should be made by individual doctors. Whitehall insiders said Mr Lansley would refuse to write a “blank cheque” allowing GPs discretion to waive prescription charges. Instead, Labour’s commitment to free drugs is likely to be abandoned.

Savings identified in Whitehall’s annual £3billion travel bill include £125million on taxis, £320million on hotels and £70million on flights. Further savings could come from the £580million budget for office furniture.

On speed cameras, the Treasury will keep the revenue the devices make — currently around £110million a year — removing any financial incentive for more to be put up.